Stock Market Recap: Stocks Rebound on the Heals of Fed Rate Cuts

Interest Rates
The gains came early in the session on Thursday, as traders bought bonds in anticipation of weakness in the US Equity markets.  That weakness never materialized, and when it became clear that stocks were going to stay firmer today, the bonds starting seeing pressure in reaction.  By the end of the session, the US, TY, FV and ED had all fallen from 5 day highs well into yesterday's range. 

Overhead resistance, in the form of their respective 20 day moving averages, may prove too much for these markets to overcome.  And while they are somewhat oversold, it's not excessive.  Given the way these markets are trading at the moment, it seems to me that the downtrend that paused in the days leading up to the Fed will resume.

Currencies
The rest of the world liked what the Fed did yesterday.  Buying interest in the DX surfaced very early in the morning, about 2:30-3:00 am, and was sustained well throughout the day.  In fact, it seems poised to settle at the highest level since early March!  As a result, the AD, CD, SF and EC are down 1% or more. 

The DX closed above the 50 day moving average for the first time, which is supportive.  The EC also closed below that same average for the first time today, which should be negative.  Should things continue as they did today, there is a large potential as the long term trends shift, or at the least, retrace.  If the DX continues to rise, this will likely have a very negative on commodity prices.

Softs
The strength in the US Dollar translated to weakness in nearly every one of these markets, as OJ was the lone market to finish in the black on Thursday.  And even that wasn't impressive on the chart.  Losses ranged from 3-7% in CT, KC, SB and CC.  Coffee and Cocoa both broke through recent price support levels.  Coffee closed at the lowest level since March….and before that, November of last year. 

Not a typically bullish sign there.  Cocoa dropped sharply on very heavy volume, and I would not be surprised to see it head back to the 2300 level in a hurry.  CT and SB accelerated their recent downtrends, with Sugar seeming to get more of a bearish push.  OJ seems lost, but weak and the rest all look weak and trending.

Metals
Yesterday, traders tried to rally these markets after the Fed announcement.  But after that the world sold them as the US Dollar gained strength.  Copper and Silver suffered the steepest declines, perhaps because the Gold has been moving lower with more conviction over the past 6 weeks. 

Copper finally picked a direction (down) out of the horribly choppy trading range that it has been in for the last month.  Silver closed at a level we haven't seen since January and Gold closed at new lows for the year!  I expect these markets to continue to be weak.  Perhaps $800 in Gold and $14.50 in Silver offer the most meaningful previous price support levels.

Energies
There was a little buying interest in these markets today, as some traders took advantage of the lowest prices in about two weeks.  However, even that couldn't get the Energies back into the black, as steady pressure throughout the night and morning pushed prices down significantly. 

There might be a bounce on Friday, but I see no reason why the NG, CL, RB and HO won't head lower.  The fundamental picture does not seem to be bullish, as adequate supplies seem to be on hand.  The market might be testing 4-5 month trend support, but is need of a serious retracement lower.

Stock Index Futures
After looking so extremely not bullish at the end of the day yesterday, the stock indexes were pressured overnight.  But by the time Wall Street opened, the outlook had changed and the markets began to rise.  In fact, by the end of the day, the DJIA had erased nearly ALL of the losses for the year! 

The trends are up and they seem strong.  Today's move will go a long way to bolster the courage of some the bulls that have been sitting aside in cash positions.  I would expect further strength in the coming weeks.

Livestock
Strength in the Dollar also translated to weakness in the Livestock (see a pattern yet?)  Lean Hogs took the worst hit, percentage-wise, but LC and FC also closed at their weakest levels in two weeks or so.  When looking back over the last year or so, the rally in prices in April appears likely to be a retracement in a bearish market.  Unless they find price support soon, I would expect a drop to (or possibly through) the lows of April. 

Grains
Corn prices finished up today, as traders looked to the weather forecast for guidance, but I'm still very skeptical of much more strength in corn prices.  The soy complex fell sharply today, as strength in the DX and perceived potential acreage gains gave traders more reasons to sell. Wheat continues to head lower at it's own pace and rice fell sharply again as bullish traders ran for the exits for the sixth consecutive day. 

Funny how markets tend to fall in price right around the time the mainstream press gets a hold of a bullish story.  Typically, this is not the time of the year to be bullish, as the crops WILL get planted, so I would caution against trying to buy dips in these markets.  I expect further weakness, especially as the weather cooperates a little better in the upcoming weeks.  Planting Progress reports, issued every Monday afternoon, do not show "normal" progress yet, but the farmers will get the crops planted.  They always do.